Britannia to rope in partner to focus on dairy business

BENGALURU: Biscuit maker Britannia Industries plans to rope in a partner to strengthen its dairy business and discontinue a few brands in this segment as part of a strategy to focus on higher margin products.

“Dairy project is now in its final stages and in another month we can give a clear view,” Britannia Industries managing director Varun Berry said in an analysts’ call on Wednesday. “Home for this project will be Pune’s Ranjangaon food park, in the middle of districts which produce highest amount of cow milk. The objective is to become more competitive and make better margins,” he said.

He did not name any potential partner. This will be the Good Day cookies maker’s third attempt at a joint venture in the dairy segment, which has been dragging its overall growth. In 2002, Britannia had formed a joint venture with New Zealand-based Fonterra Dairy to sell milk and milk products under the Milkman Brand. After recording losses, Fonterra exited in 2009 and sold its 49% stake to Britannia.

Around the same time, Britannia had also ended its decade-long association with French foods and dairy giant Groupe Danone SA. The Indian dairy market is largely controlled by cooperatives such as Amul and Mother Dairy. In the first quarter ended June Britannia reported 7.4% jump in sales year on year in spite of the implementation of goods and services tax (GST) last month, which had led to destocking in trade in June. Berry said destocking was about 10% in the month of June as traders were uncertain of the new tax regime.

Britannia pulled back on advertising in the first quarter due to subdued environment after demonetisation and the onset of GST. The company spent Rs 80 crore on marketing and advertising in the quarter, Rs 15 crore less than a year ago. Berry said advertising and marketing spend will now “start to come back to normal”. According to the company, after demonetisation and GST, local brands are facing pressure in the Rs 27,000-crore biscuit category.